Are sellers being realistic yet?

I read a news story from MSNBC indicating the reality now setting in on many sellers in the market. You can read the story at http://www.msnbc.msn.com/id/27648884?GT1=43001

One statement was made by a Florida seller, "We lost close to $100,000 in equity so we were walking away from real money."

First - is it "real money" or "not yet realized" money. For homeowners who purchased a home in 1st quarter 2007, their actual value vs their purchase price is likely MUCH lower in the present market. THEY have lost REAL money.

But if you bought a home in 2003, and gained $150,000 of equity from 2003 through 2006 - and are now back to 2003 levels - their only real loss is potential, or loss of equity. Or, perhaps the real loss is when you compare your home investment to the lost opportunity of putting your money in other venues such as mutual funds.

I am noticing a continued trend, however, of the WIDE GAP of hopeful sellers with the narrow expectations of buyers in today's market. One trend was in a community in south Poinciana, FL. This is actually in the Polk county section of Poinciana.

I noticed the median sales price vs the average sales price. But then, I started to compare, as I always do in my appraisal reports, the difference in sales price vs listing price. Typical observations...3-4% difference.

But then I looked also at the ORIGINAL list price vs the sales price. WOW. This is where sellers have to face some reality and quick - if they want to move their homes!

You see the trend? Homes were initially listed 17-23% above the sales price. This area has been hammered hard by foreclosures, short sales, etc. So buyers in this market are really looking for a deal. And when a seller is now competing against bank inventory - the markets are not forgiving. The numbers show that buyers can get pretty decent homes (maybe some carpeting and painting needed) - for in some cases 1/2 of the competing listings!

I found this quote from the article very interesting:

"A recent Coldwell Banker report showed that more than three-quarters of its real estate agents surveyed said most sellers have unrealistic initial listing prices for their homes."

Help me understand this Realtors....why would you list a home if you clearly believe the price if too high? I know you WANT the listing. Are you betting you can wear down the seller and convince some future price reductions? Does this lend itself to sellers who are digging their heels in just thinking that you - the Realtor - are not doing your job?

Maybe this is where some additional help can come in handy. I know most people think of using an appraiser only at the END of the transaction...when the bank REQUIRES one. But why not at the beginning? What is the view of an appraiser in today's market? Are we too mired in "over inflated appraisal" stories? Have Realtors just been exposed to too many low quality appraisers who only seem to know how to fill out forms and "hit the sales price", etc?

What if you could enlist a qualified, professional appraiser to help you convince that seller of their unrealistic expectations? Would that be worth $300-$400? What if you could have a quality appraiser provide you with a pre-listing appraisal, measure the home, get you a floor plan, true measurements, market analysis, and specifically...what the seller can expect in declining market conditions?

I know in my reports, I break down market declines into a daily figure. So your seller could see they may be losing 0.0025% each DAY they wait in the market.

I know you don't want to spend $300-$400 out of YOUR pocket...but how much money are you wasting with trips to meet the seller, renegotiate the listing price, time spent discussing reductions, etc? Perhaps $300 out of the gate may get quickly repaid with less hassle from the seller and also a quicker closing?

Perhaps once that seller learns you went out on the limb to employ a "team approach" and hires a quality, certified real estate appraiser - that one listing could turn into multiple referrals? All for the cost of a QUALITY real estate appraisal.

And I keep harping on QUALITY here, since you don't just want someone who has been licensed for 2 years. You want someone who WANTS to tell you and the seller the TRUTH. Someone who can break down market statistics, decline rates, neighborhood trends - and formulate that into a very simple to understand report that your seller will grasp.

I hope you will consider employing an appraiser in a pre-listing scenario. But be sure you ask them some specific questions.

1. How long have you been licensed?
2. What methods do you employ to "break down" the market?
3. Do you use graphs, charts, or regression analysis tools?
4. What sources of data do you use (assessor only? MLS and assessor, other online tools?)
5. Are you a member of any educational groups (Appraisal Institute, NAIFA, FREA?) to demonstrate your commitment to eduction and advancing your skills?
6. And lastly - can you send me any samples of your work so I can know they kind of appraiser I may be working with?

In today's markets - there are plenty of appraisers all looking for new sources of work. That is good and bad for you. Good because appraisers may be more willing to let you "interview" them. Bad - because you, the REALTOR need to do more research into knowing what makes an "average" appraiser and what makes a "QUALITY" appraiser.

I hope this gets you thinking. And...I hope it helps you discuss the "gap" with your sellers so you make the most of YOUR time and theirs in the market!

Make it a productive day

AUTHOR: Richard D Ferris - AmcAppraisalsinc.com Phone 877-789-5249 or email me: richard@amcappraisalsinc.com

Richard D. Ferris AMCAppraisalsinc.com richard@amcappraisalsinc.com (877) 789-5249 One # Does It All - Voice/Fax Residential Appraisals in Lake, Orange, Osceola, Polk, and Seminole Counties. Also servicing Deltona, Deland, and Orange City in Volusia County. Florida State Certified Residential Appraiser #RD4088 FHA Certified : Associate Member Appraisal Institute